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Technology, Preference Structure, and the Growth Effect of Money Supply

Jun-ichi Itaya and Kazuo Mino

No 05-35, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper studies the growth effect of money supply in the presence of increasing returns and endogenous labor supply. By using a simple model of endogenous growth with a cash-in-advance constraint, it is shown that the growth effect of money supply depends on the specifications of preference structures as well as on the production technology. Either if the production technology exhibits strong non-convexity or if the utility function has a high elasticity of intertemporal substitution, then there may exist dual balanced-growth equilibria and the impact of a change in money growth depends on which steady state is realized in the long run. It is also shown that there is no systematic relationship between the growth effect of money supply and local determinacy of the balanced growth path.

Keywords: monetary growth; indeterminacy; increasing returns; non-separable utility. (search for similar items in EconPapers)
JEL-codes: E31 E52 O42 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-12
New Economics Papers: this item is included in nep-mac, nep-mon and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: TECHNOLOGY, PREFERENCE STRUCTURE, AND THE GROWTH EFFECT OF MONEY SUPPLY (2007) Downloads
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